Newsom Seeks to Move California’s Oil Profit Cap Decision Away From Skeptical Legislature

California Gov. Gavin Newsom speaks at a press conference in Universal City, Calif., on June 15, 2021. Alberto E. Rodriguez/Getty Images

Instead of letting the California Legislature decide whether to impose a profit cap on oil companies, California Gov. Gavin Newsom announced on March 16 a proposal to give the California Energy Commission—made up of the governor’s appointees—the ability to do so.

The proposed change came after lawmakers from both sides of the aisle voiced skepticism in a special meeting in late February about the governor’s plan to penalize the oil industry for windfall profits. Industry and energy experts also told legislators during the meeting that the penalty or any additional taxes could drive up the cost of fuel even more.

The new proposal also calls for creating a watchdog division at the Energy Commission that would be staffed by market experts, economists, and investigators, with subpoena power to investigate the oil industry’s sales and pricing activities. The division could also refer violations to the California Attorney General’s Office for prosecution, according to Newsom’s office.

“What we’re asking for is simple: transparency and accountability to drive the oil industry out of the shadows,” Newsom said in a March 16 statement. “Now it’s time to choose whether to stand with California families or with Big Oil in our fight to make them play by the rules.”

The Western States Petroleum Association told The Epoch Times that the new proposal still doesn’t address ongoing supply challenges that leading experts have identified as the main driver of increased costs.

“Empowering unelected bureaucrats and giving them the authority to tax and penalize refiners will likely lead to the same unintended consequences as his initial proposal—less investment, less supply, and higher costs for Californians,” the association’s spokesman, Kevin Slagle, said. “That is exactly why the [Legislature] rejected his initial proposal.”

Gas prices of more than $7 per gallon displayed at a Chevron gas station in Menlo Park, Calif., on May 25, 2022. Justin Sullivan/Getty Images

Newsom has repeatedly blasted oil companies for “ripping Californians off” beginning last year as the state’s average gas prices reached $6.42 per gallon in October 2022, a record $2.61 more than the national average.

Oil companies reported record profits following the high prices, which the governor asked the Legislature to investigate in December 2022 during a special legislative session where he unveiled the penalty proposal.

Opposing adding new fees, Republicans have called on Newsom to take steps to reduce gas prices by delaying the state’s yearly transition to a costly emissions-reducing summer-blend gasoline and stopping a planned gas tax hike set for July 1.

“California drivers pay more than they should because of the taxes, fees, and regulations imposed by Governor Newsom and his extreme liberal allies,” Assembly Republican leader James Gallagher told The Epoch Times in an emailed statement. “If Democrats give unelected bureaucrats the authority to impose this new tax, they will be responsible for the shortages, rationing, gas lines, and price spikes that come with it.”